The Premium Tax Credit – The basics | Earned Income Tax Credit

The premium tax credit – also known as PTC – is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit (PTC).

Eligibility for the Premium Tax Credit

Who qualifies

You are eligible for the premium tax credit if you meet all of the following requirements. You:

Have household income that falls within a certain range.
- If you, or your spouse (if filing a joint return), received, or is approved to receive, unemployment compensation for any week beginning during 2021, your household income is considered to fall within this range.
Do not file a tax return using the filing status of married filing separately.
- There is an exception to this rule that allows certain victims of domestic abuse and spousal abandonment to claim the credit using married filing separately; for more information, see Questions and answers on the Premium Tax Credit.
Cannot be claimed as a dependent by another person.
Meet these additional requirements: In the same month, you or a family member:
- Have health insurance coverage through a Health Insurance Marketplace for which the share of the premium not covered by advance credit payments is paid by the due date of your return.
- Are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value.
- Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.

When you enroll, the Marketplace will determine if you are eligible for advance payments of the Premium Tax Credit, also called advance credit payments or APTC. Advance credit payments are amounts paid to your insurance company on your behalf to lower the out-of-pocket cost for your health insurance premiums.

For assistance in determining your eligibility, use the Am I eligible to claim the premium tax credit? interview tool to see if you may qualify for the premium tax credit.

Claiming and reconciling the credit

For tax years other than 2020, if you receive the benefit of advance credit payments in any amount – or if you plan to claim the premium tax credit – you must file a federal income tax return and attach Form 8962, Premium Tax Credit (PTC), to your return. You claim the Premium Tax Credit and reconcile the credit with the amount of your advance credit payments for the year on Form 8962.

You must file a return to reconcile the credit with the amount of your Advance Credit payments even if you’re usually not required to file. Filing your return without reconciling your Advance Credit payments will delay your refund and may affect your eligibility for future Advance Credit payments. For more information on filing a return to claim and reconcile the credit see Premium Tax Credit: Claiming the credit and reconciling advance credit payments.

Filing electronically is the easiest way to file a complete and accurate tax return. Electronic filing options include free volunteer assistance, IRS Free File, commercial software and professional assistance.

Shared policy allocation scenarios

Grandparents are buying insurance for their grandchildren, none of whom are being claimed on the grandparents 1040 tax return. The grandparents don't always know that they need to provide the Form 1095-A, so none of the families involved have the information when claiming the credit. This action needs to be questioned if there are concerns as to who’s required to report the data from the Form 1095-A.
Taxpayers also have dependent children that have PTC on their family policy, but then the child gets married. How to calculate and report PTC? Since the dependent child must now file a married filing joint return, the parents should provide the 1095-A to allocate the credit on the dependents tax return.
Divorced or legally separated taxpayers with dependents on the policy but not on the return. The taxpayer and their former spouse must allocate premium payment amounts on their separate returns to figure their PTC and reconcile it with the APTC. This data will be shown on the 1095-A.
- Examples: If you have more than one tax family sharing the same policy, for instance, partially in situations involving separated parents, divorced parents, or maybe when one spouse is carrying the insurance for the dependent children. Or whereas the noncustodial parent is carrying the insurance for the children and the custodial parent is claiming the children on their return. These are cases where the taxpayers will need to allocate the premium payments. The taxpayers are free to allocate the premiums in any manner they mutually agreed upon and must report the allocation in Part 4 of the Form 8962.

Common issues

Inaccurate Form 1095-A, Health Insurance Marketplace Statement data: If the data on Form 1095-A is inaccurate, the taxpayer will need to reach out to the Marketplace to have a corrected 1095-A issued. If the information on the return does not match the information reported, the IRS will correspond with the taxpayer to obtain the information needed to process the return.
Inaccurate information submitted on the tax returns to IRS (that is, divorced or legally separated taxpayers with dependents on the policy but not on the return): If taxpayers are divorced or legally separated with dependents on the policy, but not on the return, the taxpayer and their former spouse must allocate premium payment amounts on separate returns to determine the PTC amount and reconcile it with the APTC. These figures will be shown on the 1095-A.
- Examples: When you have more than one tax family sharing the same policy, for instance, in situations involving separated parents, divorced parents, or maybe when one spouse is carrying the insurance for the dependent children. Or whereas a noncustodial parent carries the insurance for the children and the custodial parent claims the children on their return. These are instances where the taxpayers will need to allocate the premium payments. Taxpayers are free to allocate the premiums in any manner they mutually agree upon and must report the allocation in Part 4 of the Form 8962.
Inquiries made to the ACA Marketplace; however, the taxpayer never received a quote: If a taxpayer expressed interested in enrolling in a Marketplace plan but never received the necessary information to follow through with the enrollment, when the return is filed, it will not reject because nothing was paid or reported by the Marketplace.
Incorrect taxpayer assumptions
- Marketplace health plan was successfully canceled or unenrolled: The taxpayer will need to contact the Marketplace to resolve the issue and if necessary, have a corrected or voided 1095-A issued. If the taxpayer received any APTC, they are still responsible for reconciling any APTC that was paid on their behalf.
- No knowledge of enrolling into a Marketplace health plan or having a secondary Marketplace health plan policy: If the preparer or taxpayer think they are not required to complete & attach Form 8962 to their tax return, they should confirm that APTC was not paid to their Marketplace health insurance company for themselves or any member of their tax family. To confirm that APTC was not paid, the taxpayer should attach a statement to the return titled "ACA Explanation" that should include a written explanation of the reason why they believe Form 8962 should not be required.

Rejected tax returns due to the missing Form 8962, see IRS: How to correct an electronically filed return rejected for a missing Form 8962.

Form 1040

File Form 8962 with your Form 1040, Form 1040-SR or Form 1040-NR.

Publication 974, Premium Tax Credit

For more information on the Premium Tax Credit, as well as the latest information about developments, such as legislation enacted after it was published, please see Publication 974, Premium Tax Credit (PTC) PDF.

Resources

Visit HealthCare.gov for information on providers and general information about health insurance coverage.

Visit The Health Insurance Marketplace for more information on Health care insurance purchased through the Marketplace.

Review the PTC FAQs for basic PTC information, PTC eligibility, PTC computations, PTC reporting, etc., at Questions and answers on the Premium Tax Credit.

The Premium Tax Credit – The basics

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